Five reasons why Trump is not ready for a trade war, and China could emerge stronger from the contest

A trade war between the United States and China may help resolve their deep differences, but the fight won’t be easy. If the Trump administration proceeds without adequate preparation, the US and the global economy may be far worse off than if nothing had been done.

There is no doubt that China plays unfair, damaging itself and its trading partners with discriminatory policies and growing ambitions to dominate advanced technologies. Given the nation’s size, a distorted Chinese economy means a distorted global economy.

The Trans-Pacific Partnership’s rules on intellectual property, investment, the digital economy and state-owned enterprises, abandoned by Donald Trump, could have been an excellent tool to constrain Chinese industrial policy, but that may not have been enough to discipline a Xi Jinping-led China, the world’s most enticing domestic market with growing capabilities. Perhaps the only way to move China may be to push and punish with unilateral measures.

This appears to be Trump’s conclusion. Hence, his announcement that the US will adopt tariffs of 25 per cent and 10 per cent on steel and aluminium respectively. The Section 301 investigation into Chinese intellectual property rights abuses could result in tariffs, limits on direct investment, expanded export controls and visa restrictions.